Building a successful independent financial advisory firm that can support the firm’s key stakeholders is a significant accomplishment. But building a successful firm is the first milestone, not the end of the journey. Once the firm is established and stabilized, the next milestone should be to create a sustainable enterprise. This goes beyond figuring out the service and pricing model, attracting and retaining loyal clients, solid branding, and a trustworthy reputation.

Outlining strategic objectives and planning for the company’s future with a solid succession plan are both tasks that every business owner should undertake at some point. However, simply doing it doesn’t guarantee a successful transition plan; succession planning poses many challenges and potential pitfalls of which financial advisors need to be aware.

The exact details of a succession planning process are determined by the size of the firm and the urgency with which successors need to be chosen. With an aging workforce, the need for speed is greater. It is less pressing when key positions are filled by younger executives.

While financial advisors get paid for helping their clients make sound financial decisions and plan for retirement, they themselves are also faced with these same challenges in regards to their own practices. Premature death or accident are an unpopular topics under any circumstances, but nevertheless, they are subjects that need to be addressed so that loved ones and business interests are taken care of after death.

The creation of a succession plan for your business should not be considered an optional exercise. It’s a task that owners and executives must complete for the sake of their employees and shareholders. Think of it in terms of establishing a legacy for yourself.

All businesses, regardless of type and size, have an organizational structure that determines how the company is managed on a daily basis. While they may have all the right advisors in place for the current state of the business, it is important for organizations to make sure they have a plan in place to keep the business thriving long-term, regardless of who is at the helm. Succession planning, as both a concept and a strategy, establishes a framework for identifying and developing next-gen talent to replace the founder when she/he exits the business.

Great article from Matthew Halloran on succession planning. He makes 10 good suggestions for buyers/sellers to be thinking about, here is a quick summary:

Every business and client base is unique. But, there are some common core elements for advisors to consider if they want to begin developing a succession plan or internal ownership track for the next generation. We have seen and developed a wide variety of plans for our clients and know it's easy to get bogged down in the details or let these types of plans become overly complex and “die on the vine.” Our recommendation? Start planning sooner rather than later, and keep it simple.

What should you do when one of your key staff comes into your office and tells you they are resigning to go start their own competing business? The simple thing most of would do is to take their resignation and call them a Judas. But, consider an alternative. When your key executive has that entrepreneurial spark and an idea, try harnessing it to your advantage!

Change is hard. No one likes it. So it is no surprise that so many advisers avoid the subject of succession planning. Both a Cerulli Associates study and polling by the Financial Services Institute found that almost 60% of advisers have not yet identified a successor. Yet every year more advisers get closer to their inevitable transition. An estimated $2.3 trillion in assets is controlled by advisers over the age of 60.